In the design and development of digital radio systems there is a need for accurate assessment of degradations resulting from various sub-system imperfections. The modeling technique described here has a wide range of application, and examples show how, in particular, it may be used in the derivation of system distortion budgets. When combined with appropriate experimental test measurements it also provides a powerful diagnostic tool for interpreting and improving the performance of prototype equipments. This important aspect of system development is considered in some detail, again with reference to illustrative examples from laboratory trials.